ABSTRACT: We analyse the effect of competition on quality in hospital markets
with regulated prices, considering both the effect of (i) introducing
competition (monopoly versus competition) and (ii) increasing
competition through lower transportation costs (increased
substitutability) or a higher number of hospitals. With semi-altruistic
providers and a fairly general cost structure, we show that the
relationship between competition and quality is generally ambiguous. In
contrast to the received theoretical literature, this is consistent
with, and potentially explains, the mixed empirical evidence.